Serious Questions About Canadian Solar

Canadian Solar (CSIQ) recently reported improving results and would have you believe that the trend is up and away. After all, we are solving the world’s energy crisis.

What the company did not point out is that, despite the corporate name, they hardly have any operations in Canada. Most of its revenues come from Europe (well over 85% last quarter), but most of its manufacturing is in China. The revenues in Asia are anaemic. Asia needs to become energy efficient also so you have to wonder about the marketing strategy.

Speaking about marketing, there is no discussion on how they manage the distribution channel. Is it direct sales, distributors or some form of agency agreement? How do they know they are making the right deals? You cannot rely on the market place just beating a path to your door.

The earnings release headline trumpets an 87% increase in revenues Q3 over Q2 but they neglect to mention year-over-year is a decrease. Accounts receivable net stood at $227 million, which is still larger than the entire quarter's revenue, which is supposedly 87% greater than the comparable quarter. They are not collecting their receivables.

Value added tax recoverables doubled to $31 million, or 15% of the quarter's revenue. Just seems huge, if you know what I mean.

Short Term borrowings tripled to $322 million, which explains where all the cash is coming from. No explanation about their banking relationships or structure.

Payables have jumped from $30 to $157 million. When your payables are equal to 50% of the quarter’s revenues you have to wonder about operating difficulties and tough guys knocking loudly on your door. Accrued warranty costs jump 40% to $14 million, with no explanation about warranty issues, policies or any other danger signals.

All this was enough to drive the stock to its 52-week high. Hmmm... Where is the SEC in all this.

Comments

[spiritcraft]

To comment on the year over year decrease: That is due to the price of raw materials (silicon) being a fraction of what is was last year. Guage growth with Megawatts and EPS when looking back a year.

2009 Nov 18 12:25 PM

[LaChic]

what a breath of fresh air to read your post, that is exactly my position with that canadian solar stock. I think all solar stocks should be sold right now, since most of them are at the hights for the year. Only a few solar stocks will be top dogs and will be able to ride this market later on. I just don't know which ones, and it is too early to tell.

2009 Nov 18 05:36 PM

[TigerFund]

The author should do a little more homework instead of posting garbage like this.

Maybe you should read into introduction of csiq, like in the ER summary, there is the revenue of qtr last year.

If the author is not a short, he's at least lazy intellectually.

2009 Nov 18 11:01 PM

[jbde]

Everyone knows CSIQ is a China manufacturer - not news - not an omission.

For whatever reason CSIQ is performing and so is it's stock. You have to assume those who really know what is going on in the company and the industry approve.

Now let's talk TSL - the real winner!

2009 Nov 19 08:53 AM

[zawy]

The decrease in silicon cost does not change the importance of year over year earnings being 18% less (which they did not "keep a secret" as was implied by the author). What happens from here as Germany buys less and Chinese subsidies are gone?

Otherwise, CSIQ is my pick for beating FSLR over the long term.

1 GW manufacturing capability (equal to FSLR's actual production this year) and yet their market cap is 13 times lower than FSLR. Sure, FSLR has 3 times the profit margin and is growing faster, but the factor of 13 makes me wonder.

2009 Nov 19 12:44 PM